How the Iberian country went from fossil-fueled electricity to a lion’s share of renewables
Portugal — a republic just shy of 11 million citizens — is best known for its cobblestone villages, port wine, and stunning beaches. Yet in the past decade an exciting transformation has swept the country, earning it recognition for another reason: making the switch from fossil-fueled electricity to predominantly renewables. In 2006, fossil fuels generated two-thirds of Portugal’s electricity. Seven years later, in the first quarter of 2013, renewables instead generated nearly two-thirds of electricity, and for all of 2013, 58 percent. Why and how Portugal made this remarkable switch, and how the Portuguese grid successfully handled large amounts of peaky, variable wind power, is a lesson for other nations.
The motivation to migrate its energy system
As late as 2006, Portugal depended on imports of oil, coal, and natural gas to generate two-thirds of its electricity. At the beginning of the decade, in 2001, this cost Portugal more than €5 billion. Portugal thus had a strong incentive to reduce its dependence on expensive imports through domestic, non-fossil-fuel sources.
In 1988 Portugal became one of the first European countries to implement a feed-in tariff (FIT), focused on cogeneration and renewables, including wind. The FIT was later expanded in 1995, but it took a second policy driver for non-hydro renewables to really take off.
In 2001, the European Commission established a goal of 22 percent of gross electricity consumption from renewables by 2010. The Portuguese government committed to generate 39 percent of electricity from renewables by then, third only to the targets of hydro-rich Austria (78 percent) and Sweden (60 percent). En route, Portugal nearly doubled its renewable electricity generation capacity — mostly with new wind installations — from 4,600 MW in 2001 to 8,800 MW in 2010. In fact, renewables for the first time surpassed fossil fuels as Portugal’s primary power generation source, with non-hydro renewables growing 800 percent. That same year (2010), Portugal adopted an even more ambitious National Renewable Energy Action Plan that further accelerated renewables’ rise, targeting 60 percent of electricity from renewables by 2020.
On with the wind
Meanwhile, in 2005, the government began to restructure and privatize formerly integrated state energy utilities, creating utility Energias de Portugal and grid operator Redes Energéticas Nacionais. In parallel, Portugal’s new government commissioned 1,800 MW of new wind power capacity through a public tender (the ENEOP cluster), investing €290 million in the winning consortia and more than doubling Portugal’s 2005 installed wind capacity.
From 2001 to 2013, average FITs for wind were $103 per MWh, guaranteed to developers for 20 years. In a country with abundant wind, these favorable financial incentives led to 500 percent growth in installed wind capacity between 2005 and 2013, from 1 GW to 5 GW. Though some have said Portugal’s FITs are too high, those FITs have proven an affordable way to shift the country’s energy economy away from the €5 billion per year it previously paid for imported fossil fuels: in 2010, the Portuguese government spent about $880 million on wind FITs that brought in almost 10 TWh of renewable, wind-powered electricity generation, roughly one-fifth of all Portuguese generation.
By the end of 2011, Portugal ranked tenth worldwide in absolute wind power capacity and second in percentage of electricity consumption generated from wind (behind only Denmark). As in Denmark and similarly wind-rich Spain, the surge in wind turbine installations led to the birth of a new Portuguese industry: by 2020, electricity generation from renewable sources will account for an estimated 35,000 new jobs.